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Tax Engineering

What are Trusts and what are its advantages?


Question

What are Trusts and what are its advantages?

Answer

Tax havens do not offer many advantages without the personal or legal entity of Trusts. The basic definition of a Trust is: a mediation of a physical person or a public limited company (SA, SL, LTD, INC) generally owned by the trustworthy lawyer to hide and protect the assets of the final beneficiary. The Trust is widely used in the common law to hide the ownership of bank accounts and partnerships that a natural or legal person registers as a final beneficiary. The Trusts are also known as nominees where a trusted lawyer performs the functions of final beneficiary such as the company's billing and tax triangulation to save the maximum taxes to the final beneficiary.

The Trusts have their origin in medieval England when the peasants leased and exploited lands belonging to kings, feudal lords or the church itself. These feudal lords imposed very strict lease laws on the peasants and differentiated two types of landowners. The owner of the land (legal owner) and the peasant who could benefit from the land for a period of time indicated in the agreement. The medieval Trusts transferred the rights of the property and the benefits of the lease of the land to a trustee beneficiary who could end the agreement whenever he wanted with the consent of the final beneficiary. A trustee who was the lawyer, adviser or person of trust of the final beneficiary carried out the exploitation of the land. There was a fiduciary agreement between the trustee and the feudal lord (beneficial owner) where the limitations of the trustee were certified.

Advantages Trusts

  • Opacity for the final beneficiary
  • The final beneficiary always has control over its properties since the Trusts can be edited through a private contract signed between the beneficial owner and the trustee.
  • The risk of seizure does not affect the final beneficiary since the trustee can transfer the assets and benefits of the trust whenever and wherever he wants. The criminal prosecution of the Trust is very complicated for high tax countries since when a trustee transfers the ownership of assets or benefits to the beneficial owner, the country that requests the confiscation could condemn the trustee for raising assets but because the operation took place in another country it is a very expensive procedure to follow.
  • The Trusts that are incorporated in tax havens, for example, Belize, do not collaborate with the judicial authorities and are ideal to protect the patrimony.
  • In Trusts it is impossible to know who is the beneficiary of the shares of a company when buying, selling or voting.
  • Trusts are widely used to save taxes on wills since the trustee can transfer properties to countries with lower taxation and avoid inheritance tax that would have to be paid in the country of origin.
  • Hide money and property before divorcing from your ex-partner to avoid payment of maintenance.
  • To avoid paying taxes the trusts must be constituted by a lawyer or trustworthy person in a country different from fiscal residence of the final beneficiary.

Disadvantages of Trusts

  • If the trustee is not a lawyer or a trusted person he could disappear and you could lose your property and money. Make sure an armored contract is signed between you, the final beneficiary, and the trustee where it is indicated that the given power may be revoked at any time. The use of inexperienced figureheads makes this type of scams and problems possible.
  • Not all Trusts are opaque. In Liechtenstein it is possible to know the final beneficiary at any time. Currently the most opaque Trusts can be registered in Belize.


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